LN Mittal, the new steel mogul

CALCUTTA, India, Oct. 26 (UPI) -- When Lakshmi Niwas Mittal first popped up on the radar screen of international media after acquiring Chicago-based Inland Steel in 1998, the Wall Street Journal called him the "Carnegie from Calcutta."

On Monday, however, Mittal became several times bigger than the 103-year-old United State's steel legacy of Andrew Carnegie with his acquisition of Ohio-based International Steel Group in a deal worth $17.8 billion.

The deal involves Netherlands-based Ispat International's -- 77 percent owned by Mittal -- buying his family's LNM Holdings in a reverse takeover by issuing shares worth $13.3 billion to form a new company called Mittal Steel Co NV.

This new company will then pay $42 per share in cash and stock -- or about $4.5 billion -- to buy ISG. With this acquisition Mittal Steel will be the world's largest steel maker with an annual capacity of 70 million tons straddling four continents and 14 countries.

Mittal said this new formation, Mittal Steel Co NV, "will be the largest and most global steel company in the world that will be listed in New York Stock Exchange and Euronext Amsterdam."

Post merger the family will own 88 percent of the combined group. Minority shareholders of Ispat International will hold 3 percent and ISG will hold 9 percent in the new entity.

Arcelor SA, based in Luxembourg is currently the world's biggest steel maker producing 42.8 million tons of steel with revenues of $29.2 billion in 2003.

According to Mittal "becoming the largest steel producer is not an end in itself, but to put forward a globalized steel industry is a more important thing. There is still room for consolidation in the worldwide steel industry."

And although Mittal may feel that with this acquisition he has finally succeeded in achieving his ambition of making "the global steel industry overcome its regional preoccupation," analyst said that this move actually made him win a crucial "virility" test.

Indeed, for the 54 year old Mittal, brought up in Calcutta, India, where his family is still based, who went on to become one of Britain's five richest people with an estimated fortune of 3.5 billion pounds, this new acquisition may just be a glimpse of his strength and what lies ahead in the world of steel making.

"I have seen the steel industry for the over 30 years," he says. "It has become increasingly clear to me that there is too much flab and fragmentation and too little attention to lowering cost of production. Other industries like aluminum and auto have seen the virtues of globalization. Now it is time for steel."

Mittal's steel business has seen unprecedented growth in the last 10 years, since L N Mittal took charge. In 1994, after the division in the family, his steel-making capacity was only 5 million ton. In the last 10 years, that has shot up to 70 million tons.

Analysts say, the special facet of Mittal's rise was that he turned steel industry's crisis in 2001-04, because of a global economic slowdown, into a big opportunity for himself. He bought ailing plants in Romania (2001), Algeria (2001), South Africa (2002), Czech Republic (2003) and Poland (2004) in Eastern Europe at virtually throwaway prices, turned them around, and became the rising steel king of the world.

The group had got into steel in 1975 when L N Mittal's father Mohan Lal Mittal left the country because of India's restrictive economic policies. He went to Indonesia to set up Ispat-Indo, a 65,000 ton a year steel plant.

Ispat Indo then started spreading its activities across the globe in 1989 when it acquired an ailing steel plant in Trinidad and Tobago which LN Mittal revived. By then, the production capacity of all its steel plants outside India had crossed the one million ton mark to reach to 1.1 million tons per year. After that, there was no looking back.

In 1994, the group underwent a partition of business interests in the family. All the foreign businesses were hived off into a separate group, Ispat International, under the control of L N Mittal while the Indian operations remained with his younger brothers P K Mittal and V K Mittal. LN Mittal's turning point came in 1995 when he entered Europe by acquiring a steel plant in Hamburg, Germany. With this, the capacity of the group reached to 11.2 million ton.

The Ispat International went for listing in 1997 on NYSE. After this, most of the group's acquisitions were made under another company, Mittal Steel, as other shareholders were wary of entering risky zones like East Europe. But, LN Mittal was always counter-intuitive in business moves -- first he left the assured Indian market to his brothers to explore world, and now he marched headlong to East Europe when others were fighting shy because of opportunities there.

Now Mittal says, "My (new) theme is how to make the steel industry sustainable. The day every steel CEO sees making money as his objective, the steel industry will become sustainable through downturns and upturns."

And steel analysts round the world are hoping that his juggernaut keeps rolling on.